Search results for: offshore

This blog has been pretty clear over the years that an offshore asset search is not for the faint of heart or anyone on a tight budget.

We have recommended that even if you think there are assets outside the U.S., you could get a better idea of where they may be by searching U.S. public records first (The Offshore Assets Play Book).

Assume you want to do a little digging on your own for low-hanging fruit – signs of foreign assets that you could hand an investigator. You wouldn’t necessarily find the assets themselves, but you could provide useful leads that save you money if you eventually hire someone to do a fuller search. Some tips:

  1. Begin by searching widely, because the biggest mistake people usually make is to restrict the scope of their search too quickly. How do you search everywhere in the world without breaking the bank? There are a couple of free databases that list corporate directorships in overseas jurisdictions. The Offshore Leaks Database is a collection of various data dumps uncovered by journalists and includes names and addresses of directors and companies in some of the most difficult-to-penetrate offshore jurisdictions. You won’t find bank account information here but it’s a place you should always check. https://offshoreleaks.icij.org. Next, try Open Corporates. As above, it’s free and while not comprehensive it’s a good starting point.
  1. Remember that the Internet works abroad too. You can see company information in quite a few countries if you look for them. Company registration in England, for example, includes more information that you usually get with a private company in the U.S. British subsidiaries of U.S. companies publish their figures even if they aren’t traded on a public exchange. You can also get address information for directors, and with that you can sometimes find a person’s home address. Real estate in the U.K. isn’t easily searchable by name – you need an address. Companies House can help you get it.
  1. The internet now provides instantaneous translation. Say you come up with great public records in Dutch and you have no idea what they say. Open another window and paste a few hundred words at a time into Google Translate, and you can get a serviceable if not exact translation.

Will any of this replace what an experienced investigator can do? Not usually, because as I explain in my book, The Art of Fact Investigation, the real challenge of fact finding is in knitting together the output of various databases. More importantly, it’s playing smart hunches about which search terms to use and filing in the blanks the databases always leave. “John Smith and hidden assets and bank account” as a search term will never get you very far.

Still, if you run down some of these leads your investigator shouldn’t charge you for work you’ve already done, and you may get farther than you would have before.

In any search, that’s called progress.

Clients always want to know what’s involved in searching offshore for hidden assets. Our usual answer is, “time and a lot more money than it’s probably worth, unless you’re looking for millions of dollars.”Woman Telescope IN MONEY SEA

Suddeutsche Zeitung, one of the recipients of the leaked Panama Papers reported that one lawyer “represented a female client in a divorce case, and it cost $2 to $3 million to uncover and disentangle the web of front companies into which the assets had been poured by her husband. That is a lawyer’s fee not many are able to pay.”

While not every divorce case involves many millions, even an onshore search follows the same principles: look not just for money in the name of the person but in the name of secret companies that person created.

As I wrote in my just published book, The Art of Fact Investigation, “Given how quickly and cheaply people can set up limited liability companies (and even ordinary corporations) it is folly to assume that a person who may be concealing assets would not have availed him or herself of this simple mechanism.”

Unless there is hard evidence that a person has hidden assets offshore, we like to start onshore for a few simple reasons:

  1. It’s a lot cheaper, and if you find a good haul of assets you may find your way to a reasonable settlement. The extra money offshore could still be there, but it may not make financial sense to go after it because of the fees and the length of time it could take to litigate in Caribbean and other tax havens.
  2. It’s easier to find onshore side companies because of the much larger store of public information in the U.S. compared with most overseas jurisdictions.
  3. The onshore records may provide good leads to the offshore companies. You may find a property deed notarized in the Cayman Islands or Isle of Man, for example. If you get the tax returns in discovery to a new onshore company, you could see payments from an offshore company that could end up being the subject’s secret company.

Wherever you look for secret companies, a few similar search rules apply. These include the propensity to use the same name in multiple companies. We’ve seen net worth statements with Alpha I and Alpha II listed, but the person has omitted Alphas III, IV and V. Other common names include streets the subject grew up on, names of summer camps, favorite pets, or combinations of children’s names or initials.

Offshore or Onshore, people are people and tend to behave the same way the world over when it comes to stashing their cash.

Want to know more?

  • Visit charlesgriffinllc.com and see our two blogs, The Ethical Investigator and the Divorce Asset Hunter;
  • Look at my book, The Art of Fact Investigation (available in free preview for Kindle at Amazon);
  • Watch me speak about Helping Lawyers with Fact Finding, here.

One of the core principles of good investigation is to assume nothing and start looking from scratch. We have found a lot of money over the years hiding in plain sight: in new companies named after old companies in neighboring states, or even in places mentioned in emails left lying around the house.prenup investigation

Liberian corporations, apartments in Monaco, it’s amazing what turns up among forgotten papers in desk drawers (or on shared computers at home).

One plain sight source for possible martial assets is the structure set up at the time of a prenuptial agreement. That may seem counterintuitive. Why go after something that is not a marital asset and is contractually off-limits?

For the very simple reason that a structure set up with non-marital assets could be a perfect place to hide cash that is properly subject to division at the time of divorce.

Consider the advice of Chicago divorce lawyer Thomas J. Handler, writing in the New York Times a couple of years ago here. He argued in favor of a “stealth” prenup, which is a structure of an offshore trust, combined with a limited liability company and a management company that could be a conventional corporation or another LLC.

That’s a lot of layers and foreign borders to work through and may not be worth it unless there’s considerable money at stake. But if there is, these vehicles can be detected and breached, especially if there is a U.S. corporate vehicle attached to them.

We specialize in finding side companies that people wish to keep secret, and have written about the process many times, including here, where we wrote about secret partnerships as well as LLC’s.

Secrecy is often the most important thing about stealth prenups. As Handler wrote,

A key element of this technique is that it is, in fact, “stealthy”; no disclosure obligation is necessary because these structures have been put in place prior to marriage. Unlike traditional prenuptial agreements, where there is little chance of enforcement without the exchange of full and accurate financial information, no such requirement applies to the stealth prenup.

Even if a prenup should name the offshore-linked assets that are off-limits, they are worth a look anyway. What if the structure has changed over the years? What if cash from marriage should have been placed in the structure supposedly restricted to the pre-marriage assets?

If you don’t look for it, you won’t find it. With a lot of money at issue, that would be a real shame.

In a dramatic divorce case unfolding in Southern California this week, Hydee Feldstein, a retired partner at a large law firm, accused her ex-husband Peter Gregora of stealing $20 million of the couple’s money over the course of their marriage.  Feldstein claims Gregora hid the money in secret offshore companies, investment funds, and, in by far the most straightforward method, stuffing cash into envelopes and leaving the money off of the couple’s tax returns.

hidden money divorceBefore she retired, Feldstein’s practice focused on finance and bankruptcy law.  She was the primary breadwinner in the family, and she stated in divorce documents that she entrusted her husband to handle their financial affairs.  She claimed that Gregora used this as an opportunity to drain the couple’s joint accounts.

Commentators have been incredulous that a partner who specialized in finance law at a major law firm could be so out of touch with her own finances that she lost track of $20 million of her own money.  As it turns out, research shows that Feldstein is not so unusual.

As we wrote about here, a study by Prudential explained that most women, including primary breadwinners, lack confidence in investing and tend to shy away from managing the family finances.  No matter how successful women are, they still often leave the big financial decisions up to their husbands.  In fact, 73% of men report being the primary financial decision-makers in their families.  A dishonest husband combined with a lack of oversight can open the door to mismanagement and, as is alleged in this case, fraud.

We have seen this first-hand in countless cases.  Smart, accomplished women come to us looking for money they earned, but which their husbands have magically made disappear.  These women often admit to us that they left all of their financial decisions to their husbands, and have never so much as glanced at a bank statement or tax return.

Even in these cases, all hope is not lost.  Our clients often have far more valuable information than they realize when it comes to tracking down hidden assets, even if they did not control the family finances.  For example, a client may tell us that her husband loves skiing in Colorado, which would lead us to look for a vacation property in that state.  Or she may know the name and address of one of her husband’s companies, which could lead us to a dozen other LLC’s that he kept hidden from her.  We are often able to find hidden companies, real property, stock holdings, and other assets through in-depth client interviews and our meticulous investigation process.

A London judge has ordered oil trader Michael Prest to pay his wife over $600,000 in support and alimony payments or face jail time.  Prest’s case gained attention last year for a landmark U.K. Supreme Court ruling permitting Yasmin Prest to pierce the corporate veil to reach assets that Michael had placed in trusts held by his various offshore companies.  The ruling represented the first time the British courts pierced the corporate veil in a divorce case, and ultimately led to Yasmin obtaining a 17.5 million pound divorce award.

Prest claims that he does not have sufficient funds to pay the award because his company, Petrodel Resources Ltd., is no longer operational.  Yasmin asserts that, despite his claims of poverty, Michael still lives a lavish lifestyle, spending hundreds of thousands of pounds per year on luxury travel.

As we wrote here, when conducting matrimonial asset investigations, especially those involving self-employed spouses like Michael Prest, our first step is to look for companies owned by the spouse, his family, and his close associates.  If the spouse makes no mention of income from these companies in his net worth statement or if he has not disclosed his interest in them during the discovery process, then their mere existence can be a sign that the spouse is using his companies to hide money.

Once we find the spouse’s companies, we can then search for assets owned by those companies, not just by the spouse.  We may find real property, stock holdings, aircraft, boats, or any of a wide range of assets that can be uncovered in a public record search.

We were once able to find a side company owned by a lawyer husband in which he had stashed an entire thoroughbred horse farm.  We also found the value of the horses, the trucks, the barns, and even the tractors on the property, all through searching the public record.  In addition to what we uncovered, our client was also able to request broad discovery of all of the husband’s hidden companies and their assets, including trusts and bank accounts.

We wrote not too long ago here about our methodology for tracking down offshore accounts and how difficult and expensive this process can be.   Well, it looks like locating offshore accounts may have just become a tiny bit easier.

As reported in The New York Times, earlier this year, the International Consortium of Investigative Journalists leaked records which disclosed proprietary information about more than 120,000 offshore companies and trusts and nearly 130,000 individuals.  The consortium also published an online database which allows users to search through more than 100,000 secret companies, trusts and funds created in offshore locales.  The database even goes so far as to identify the entities’ true owners where possible.

As investigators, we’re excited to hear about this new database, but we recognize that it is only a starting place for offshore asset searches.  The trusts in the database represent only a small portion of the offshore trusts that are out there.  If your debtor’s name does not appear in the database, by no means does this mean that your debtor doesn’t have offshore assets.  You should also keep in mind that people don’t always put money in their own name.

The New York Times article also highlights the prevalence of Americans hiding their assets offshore.  In particular, the Cook Islands have become the perfect place for the wealthy to shelter assets from existing or potential creditors.  Business with the Cook Islands can be conducted electronically and none of the items kept in trust need to be physically located there.  Further, the laws in the Cooks are written to protect foreigners’ assets from legal claims in their home countries.  Even the United States government has had difficulty going up against a Cook Island trust.  This means that locating the hidden trust is only half the battle–it may still be very expensive to ever receive a dime of it.

That said, given that Americans have put approximately $1 trillion in offshore accounts, going after a foreign trust can be worth the time and expense where enough money is at stake.

We get asked all the time to figure out how much money a person may be hiding offshore. Usually, it’s not as straightforward as the recent guilty plea by Ty Warner, the founder of Beanie Babies, who admitted to using a secret Swiss account to avoid paying tax on income of more than $3.1 million. You can read about last week’s plea by Warner here.

Swiss banks aren’t what they used to be, but that doesn’t make the job of an investigator unarmed with government subpoena power that much easier than it once was. When the U.S. authorities decide to bear down on a jurisdiction that likes to hide the identities of the parties who ultimately control companies and bank accounts (what’s known as beneficial ownership), countries often capitulate. As a result, Union Bank of Switzerland has been cooperating with the U.S. since 2009 in helping to expose U.S. clients like Warner engaged in tax evasion.

Still, for every Warner pleading guilty, far more people hiding money abroad are toughing it out, or else are moving their money to a jurisdiction that is less cooperative with the U.S than Switzerland. Cyprus used to be a favored locale, especially for Russian nationals or Russian-born residents of the U.S. and Europe, but since the capital controls imposed last year, Cyprus is most certainly falling out of favor.

Without the government behind you, how do you look for foreign assets?

In short, it can still be expensive and difficult, but we have found that the two most successful methods include:

  • Finding documentary proof onshore of offshore activity. Records kept on a computer to which you may have access can yield tremendous results. Our matrimonial clients often have great evidence they don’t even realize they possess. Stray bills and printouts left lying around when the marriage was still on solid ground are helpful, as are the tax returns spouses filed jointly before things got rocky and they began filing separately. Oftentimes, husbands take charge with their accountants of both spouses’ filings, even after separate filing begins. Wives dutifully sign their returns, but then forget that they have a right to obtain those returns at any time. We once got wonderful evidence from the back of a desk drawer of a Liberian company’s bank account in the Middle East. There would have been no other legal way to get it prior to discovery.
  • Tracing not where assets went when they headed offshore, but where they come from when they return. People get lazy, so it’s worth seeing which parties are paying certain bills. If a person is responsible for paying school bills and the school in New Jersey reports that payment came from Alpha Ltd. of the British Virgin Islands, you’re on to something. Similarly, if an apartment in Miami is purchased by New Yorker, but the deed is notarized by a banker in Cyprus or Bermuda, alarm bells ought to be going off.

Most useful of all is the idea that the person who hid these assets may have made a mistake.  Most of the people we search are not criminal masterminds. People don’t wipe their computers properly because doing so properly isn’t that simple. They then leave clues behind. They get lazy and pay bills from what should be secret companies. One client’s spouse was so computer illiterate that he had his secretary print out all his emails, and then left them lying around the house for his wife to find.

Even Ty Warner, an otherwise brilliant businessman, got caught.

Or, in Beanie Baby terms, more Tom-e the Turkey than Smartest the Owl.

 

In doing our investigations for assets in divorce, we often work with a forensic accountant. Sometimes they bring us into the case and sometimes it’s the reverse.

When do you need one, the other, or both?

  1. If you have all the pertinent records and you don’t think there is much being hidden, the forensic accountant is probably your best bet.

Say you have all the tax and business records you think are out there, but things still aren’t adding up. An accountant can do a lifestyle analysis that can indicate spending that isn’t supported by the stated income and assets. Records of banks, brokerages, and credit card companies give you details of sources of funds and where they are spent.

Credit reports are also critical. Those can give you bank and credit card information you didn’t already have.

A few examples of alternative sources of data include telephone records, UPS or FedEx records and airline receipts. These can get you to business relationships, sales and shipments to customers, travel activity, and major expenditures.

  • Interest – May indicate the existence of bank accounts, certificates of deposits, bonds, investment accounts, or loans receivable.
  • Dividends – Indicates the existence of bank accounts, investment accounts, stocks, or other investments in business entities.
  • Capital Gain or Loss – May point to investment accounts, stocks, business interests, or other investments.
  • IRA Distributions, Pensions, Annuities – Points to the existence of retirement accounts, annuities, or other valuable retirement assets.
  • Rental Real Estate, Royalties, Partnerships, S Corporations, Trusts – Indicates the existence of income-producing assets (real estate or business) or an interest in estates or trusts.
  • SEP, SIMPLE, Qualified Plans – Indicates retirement accounts for self-employed individuals.
  • IRA deduction – May also signify the existence of retirement accounts.
  • General Sales Taxes – This could point to the purchase of substantial assets.
  • Mortgage Insurance Premiums – Points to real estate.
  • Investment Interest Paid – Can indicate the existence of investment accounts.
  • Other Expenses (Investment, Safe Deposit Box, etc.) – This may point to investment accounts, safe deposit boxes at banks, or the like.
  1. You Have No Records or Incomplete Records, Try an Investigator

If you have nothing, think you have incomplete records or haven’t even filed for divorce yet, an investigator could help. We’ve written about this before with The Offshore Asset Starter Kit but usually recommend starting onshore.

What are the person’s businesses? Are there other assets and corporate interests he has never divulged? Old mutual fund holdings buried in securities records? An investigator can help find those.

Remember, a forensic accountant can’t analyze accounts of companies you don’t know about.

A lot of what’s out there is in public records. Anyone can get them, but the United Statese has more than 3,000 counties. Each keeps records in its own way, and a lot of the information is not on line – you have to send someone in there to look for it.

As I explain in my book, The Art of Fact Investigation, the real challenge of fact finding is in knitting together the output of various databases. More importantly, it’s playing smart hunches about which search terms to use and filing in the blanks the databases always leave. “John B. Smith and hidden assets and companies” as a search term will never get you very far.

  1. When you need both professionals

Once the investigator is done, you may still want an accountant if the numbers don’t make sense. Finding a new business is not the same as going over that entity’s books and records to see how they relate to known assets or yet further undivulged assets.

Sometimes, a forensic accountant will find a hole in the accounts that they can’t explain. Who is behind Argo Industries LLC, a payee for suspiciously expensive catering services? Is Argo really a way our person is paying himself? This is where an investigation can help.